Trans-European automated real-time gross settlement express transfer system (TARGET)

SUMMARY OF:

Guideline (EU) 2022/912 of the European Central Bank on a new-generation trans-European automated real-time gross settlement express transfer system (TARGET) and repealing Guideline 2013/47/EU (ECB/2012/27) (ECB/2022/8)

WHAT IS THE AIM OF THE GUIDELINE?

It regulates the new trans-European automated real-time gross settlement express transfer system (TARGET), which consists of multiple payment systems enabling banks within the Eurosystem to transfer money between each other in real time with immediate finality. It is the result of a consolidation project to consolidate and optimise the previous TARGET2 (settling payments) and TARGET2-Securities (settling securities) platforms.
TARGET’s ultimate aim is to reduce European Union (EU) banks’ combined operational costs and boost liquidity management*. TARGET is important for the performance of certain basic tasks of the European System of Central Banks, such as implementing the monetary policy of the EU and promoting the smooth operation of payment systems.

KEY POINTS

TARGET consists of multiple payment systems making up TARGET component systems. Each Eurosystem central bank* (Eurosystem CB) operates its own TARGET component system under its relevant national legislation in accordance with Directive 98/26/EC on settlement finality in payment and securities settlement systems (see summary).

TARGET provides for a multitude of central liquidity management services, such as settlement of central bank operations* through main cash accounts*, settlement of instant payments through dedicated cash accounts and real-time interbank and customer payments through subaccounts.

TARGET also provides settlement of transactions with ancillary systems*.

Euro transactions within the European System of Central Banks are processed through TARGET, except where central banks bilaterally agree to process them through correspondent accounts.

Credit institutions established in the EU or the European Economic Area (EEA), or acting through a branch established in the EU or the EEA, and national central banks of the Member States and the European Central Bank (ECB), are eligible to become participants in a TARGET component system upon request. Other entities may also be admitted by the Eurosystem CB operating the relevant TARGET component system. The eligible entities and the application procedure are laid down in Annex I, Part I, Articles 4 and 5 to the guideline.

For the successful operation of TARGET, each euro-area national central bank needs to fulfil certain obligations. For instance, it has to comply with ECB instructions on security policy, requirements and controls, including cyber resilience and information security, and implement the harmonised conditions for participating in TARGET – as laid down in Annex I to the guideline – that govern eligibility criteria and the opening and operation of TARGET accounts.

The ECB opens an account on its books for each euro-area national central bank to record daily cash transfers between those banks in which it is involved. The ECB’s TARGET component system is called TARGET-ECB. The terms and conditions for participation in TARGET-ECB are laid down in Decision (EU) 2022/911.

The management of TARGET is based on the following three levels of governance, as set out in detail in Annex II to the guideline.

Level 1. The ECB’s Governing Council has exclusive responsibility for the direction, management and control of TARGET, in particular for the decision-making rules in TARGET and the safeguarding of its public functions.
Level 2. The Eurosystem CBs are responsible for certain technical, functional, operational and financial management tasks, including implementation of governance rules.
Level 3. Deutsche Bundesbank, Banque de France, Banca d’Italia and Banco de España, in their capacity as the central banks developing and operating TARGET, take decisions on the daily running of TARGET for the Eurosystem’s benefit.

Participation in TARGET can be immediately terminated or suspended by the relevant Eurosystem CB if the participant becomes the object of an insolvency proceeding or no longer meets the participation access criteria. In such situations, the relevant Eurosystem CB shall immediately notify all other Eurosystem CBs.

The guideline sets out procedures to address technical malfunctions, including contingency procedures to ensure business continuity, a compensation scheme for participants and the treatment of losses.

Any disputes between Eurosystem CBs over the guideline are to be settled according to the ‘Memorandum of understanding on an intra-ESCB dispute settlement procedure’ and referring to the rules and procedures laid down in the guideline. In disputes concerning cash transfer orders between TARGET component systems, the law of the Member State where the seat of the Eurosystem CB of the payee is located shall apply in a supplementary manner.

Access to transaction-level data extracted from TARGET is permitted under certain circumstances. Decision (EU) 2023/549 allows central banks to access and use for quantitative analyses and numerical simulations, to the extent necessary, transaction-level data extracted from TARGET from all participants of all TARGET components system for the following purposes:

ensuring the efficient functioning of TARGET and its oversight;
carrying out the analyses necessary for macroprudential oversight, financial stability, financial integration, market operations, resolution and monetary policy functions;
carrying out the analyses necessary for the single supervisory mechanism, in accordance with the separation principle.

In ensuring the efficient functioning and oversight of TARGET, access to and use of the data are limited to five staff members dealing with the operation of TARGET and five staff members dealing with the oversight of TARGET, with each group having separate access to the data.

For quantitative analyses and numerical simulations, access is limited to a group of up to 15 staff members conducting research, coordinated by the European System of Central Banks’ heads of research.

The Market Infrastructure Board will draw up specific rules for guaranteeing the confidentiality of transaction-level data.

The TARGET analytical environment will be established to perform the quantitative analyses and numerical simulations. It comprises the analytical environment, to be developed and maintained by the ECB, and the simulation tool, to be developed and maintained by Suomen Pankki, Finland’s central bank.

FROM WHEN DOES THE GUIDELINE APPLY?

It has applied since 20 March 2023, when TARGET2 was replaced by TARGET. Therefore, starting from the same date:

Guideline (EU) 2022/912 repeals Guideline 2013/47/EU (ECB/2012/27); and
Decision (EU) 2022/911 repeals Decision 2007/601/EC (ECB/2007/7).

BACKGROUND

The TARGET2 platform ran smoothly for many years, ensuring safety and efficiency in European payments. During that time, technological advances, regulatory requirements and evolving consumer demand significantly changed the way payments are processed and settled.
The new-generation TARGET offers state-of-the-art market infrastructures, including a new real-time gross settlement system and more efficient and modernised liquidity management services, in addition to the possibility of making payments in several currencies.
For further information, see:
- TARGET services (European Central Bank).

KEY TERMS

Liquidity management. The services banks provide to their corporate customers.

Eurosystem central bank. The ECB or a euro-area national central bank.

Central bank operation. A payment of liquidity transfer order initiated by a central bank on a main cash account in a TARGET component system.

Main cash account. An account for the settlement of operations with central banks.

Ancillary system. A system operated by an entity in the EU or EEA that is subject to supervision and/or oversight and complies with the relevant oversight requirements for the provision of services in euro.

MAIN DOCUMENT

Guideline (EU) 2022/912 of the European Central Bank of 24 February 2022 on a new-generation Trans-European Automated Real-time Gross Settlement Express Transfer system (TARGET) and repealing Guideline 2013/47/EU (ECB/2012/27) (ECB/2022/8) (OJ L 163, 17.6.2022, pp. 84–185).

Successive amendments to Guideline (EU) 2022/912 have been incorporated into the original text. This consolidated version is of documentary value only.